ASSIGNMENT

Audi's Global Competition Implications



Audi's Global Competition Implications

In this paper we will compare the recent development of Audi and BMW and analyze the main reasons for these different developments, one can distinguish twelve main interrelated issues which determine the competitiveness of a car producer:

1. BMW has a production range from compact cars over middle class cars to luxury cars (including motorcycles). Audi manufactures middle class and premium class cars; the attempt to enter also the small car sector with the A2 failed; but in future Audi intends to develop again a small car with a fuel consumption of less than five liters because of the expected regulation on carbon dioxide emission which will measure all production models. During the first quarter in 2008 both enterprises reported records in production. Audi is aiming at an output for this year of more than one million cars for the first time in its chronicle. Regarding the product line new models are about to enter the market; for the first time a conflict is reported between Porsche and Audi because of the fact that Porsche as a major share holder of Volkswagen does not agree with the pricy policy of the Audi R8 and Q7 models which compete against more expensive Porsche cars.

2. The ADAC report on quality of cars indicates that BMW is leading in the compact and small car sector while Audi is ahead in the middle and upper class segment. The missing quality of BMW cars especially in the premium sector during the last years effected sales losses. The missing quality is seen by speakers of the IG Metall as a consequence of flexible underpaid temporary work and a lack in motivation because of labor contracts which make it possible that new workers are paid less for the same work. In a similar conflict at Audi the trade union successfully opposed plans of the management to extend the departments with specific labor contracts. The IG Metall in the Ingolstadt region was also able to sign collective labor agreements with temporary employment agencies ensuring a similar wage level for temporary workers, while only recently contracts were signed for agencies cooperating with BMW.

3. Research and development is well developed in both enterprises which have the R&D centers in Germany: Munich (BMW) or Ingolstadt (Audi) but cooperate also with settlements abroad (e.g. Audi with the University of Budapest). While BMW was cutting its own the expenditures for R&D activities and enforced cooperation with suppliers and other OEMs, Audi put it up and is about to invest 10 billion € during the next year. Actually Audi is expanding the number of jobs in research and development but is facing difficulties to staff all vacant positions. Cooperation with national and international scientific and research institutes and universities is enhanced.

4. Temporary employment increased in general in German enterprises. BMW made more use of this flexible and cost-efficient production (in single enterprises up to 30 percent of the employees were hired from temporary employment agencies) compared to ...